The next recession cannot be avoided and it is not far away

[Baruch]

I'm surprised that you, as the court jester of this forum, can impose such restrictions on yourself!

Some things have to be saved for the "special section" of the forum ;-)

[Unbeliever]

That's because they like to cover all positions...

https://www.youtube.com/watch?v=x4GDt03DgS8

[Baruch]

Which one is the politician?  You know, the one from the actual oldest profession.

[josephpalazzo]

More bad news:

There’s been endless speculation in recent weeks about whether the U.S., and the whole world for that matter, are about to sink into recession. Underpinning much of the angst is an unprecedented $29 trillion corporate bond binge that has left many companies more indebted than ever.

Whether this debt overhang proves to be a catalyst for recession or not, one thing is clear in talking to credit-market observers: It’s a problem that won’t go away any time soon.

Strains are emerging in just about every corner of the global credit market. Credit-rating downgrades account for the biggest chunk of ratings actions since 2009; corporate leverage is at a 12-year high; and perhaps most worrisome, growing numbers of companies -- one third globally -- are failing to generate high enough returns on investments to cover their cost of funding. Pooled together into a single snapshot, the data points show how the seven-year-old global growth model based on cheap credit from central banks is running out of steam.


“We’ve never been in a cycle quite like this,” said Bonnie Baha, a money manager at DoubleLine Capital in Los Angeles, which oversees $80 billion. “It’s setting up for an unhappy turn.”



http://www.bloomberg.com/news/articles/2016-01-28/some-29-trillion-later-the-corporate-debt-boom-looks-exhausted

[Baruch]

If a company used its profits, to buy back corporate stock and bonds ... then they might end up under-capitalized.  But if they used its losses (aka did it on credit), to buy back corporate stock and bonds, then the pitchforks need to come out.

[GreatLife]

Name some modern time where "There is a recession coming and it can't be avoided" hasn't been true.

Seems like one of the easiest economic prophesies that anyone could make.

[josephpalazzo]

Name some modern time where "There is a recession coming and it can't be avoided" hasn't been true.

Seems like one of the easiest economic prophesies that anyone could make.

Well, we know it's coming, but the real question is when? There's a big difference between "in 6 months" and "in 6 years".

[Baruch]

Anyone who says they know when it is coming ... is a con-artist.  Anyone who doesn't realize that the economic indicators are cooked by the government ... is naive.  Anyone who doesn't realize we have been in a recession since 2007-2008 hasn't looked out their own window.

So yes, make a prediction, predict often, and don't let on that what it is, is already in progress (or regress in this case).

If your neighbor is still unemployed since 2008, then we are in a recession.  If you are unemployed, then we are in a depression.  That is all you really need to know.

[josephpalazzo]

Anyone who says they know when it is coming ... is a con-artist.  Anyone who doesn't realize that the economic indicators are cooked by the government ... is naive.  Anyone who doesn't realize we have been in a recession since 2007-2008 hasn't looked out their own window.

So yes, make a prediction, predict often, and don't let on that what it is, is already in progress (or regress in this case).

If your neighbor is still unemployed since 2008, then we are in a recession.  If you are unemployed, then we are in a depression.  That is all you really need to know.

Your ignorance of economics is astounding. Please shut the fuck up.

[josephpalazzo]

Desperate times means desperate measures. As the economy weakens (read: deflation), measures to be taken in order to reverse the downward trend in the economy are:


1) decrease interest rate.
2) cut taxes.
3) Expansionary deficit budget.
4) Quantitative Easing.


Now, the interest rates are at record low, have been so since 2008, near the zero point. So many countries are taking the unorthodox measure of lowering the interest rate in the negative region to stimulate demand. Will it work? The verdict is still out there.


This practice hasn't reached America. If it does, time to buy better mattresses or invest in safety boxes.

Bank of Japan Adopts Negative Rates




Bank of Japan Governor Haruhiko Kuroda sprung another surprise on investors Friday, adopting a negative interest-rate strategy to spur banks to lend in the face of a weakening economy.
The move to penalize a portion of banks’ reserves complements the BOJ’s record asset-purchase program, including 80 trillion yen ($666 billion) a year in government-bond purchases, which was kept unchanged at the board meeting. By a 5-4 vote, Kuroda led his colleagues to introduce a rate of minus 0.1 percent on certain excess holdings of cash.
Long a pioneer in adopting unorthodox policies to tackle deflation and revive economic growth, the BOJ is now taking a page out of European policy makers’ playbooks in the goal of stoking inflation. The yen tumbled after the announcement, which came after Kuroda just last week rejected the idea of negative rates.
“This clearly shows the BOJ wanted to weaken the yen and raise the price of import goods and boost inflation,” said Daisuke Karakama, an economist at Mizuho Bank in Tokyo. “We don’t know this negative rate policy will be good for the economy in the end,” he said, adding that success in Europe doesn’t guarantee the same for Japan.

http://www.bloomberg.com/news/articles/2016-01-29/bank-of-japan-adopts-negative-interest-rates-by-vote-of-5-4

[SGOS]

I'm not sure how this minus interest works, even though I had considered the idea long before any of this came up.  The reason I had thought about it was because I knew that lowering interest was one of the tools used to spur the economy, and I knew that they were already approaching zero, so I considered what would happen if interest rates were set below zero.  It sounded like a bizarre idea then, and it still does.

Let's say you borrowed 20,000 to buy a car, so every month you send the bank some kind of payment on the principal, and the bank sends you a check for the -1% it owes you.  In the end, the bank get's back the 20,000 but goes in the hole because it had to pay you for taking out the loan.  It doesn't sound like a good deal for the bank.  Although someone has done some thinking about this, I'm sure.

[josephpalazzo]

I'm not sure how this minus interest works, even though I had considered the idea long before any of this came up.  The reason I had thought about it was because I knew that lowering interest was one of the tools used to spur the economy, and I knew that they were already approaching zero, so I considered what would happen if interest rates were set below zero.  It sounded like a bizarre idea then, and it still does.

Let's say you borrowed 20,000 to buy a car, so every month you send the bank some kind of payment on the principal, and the bank sends you a check for the -1% it owes you.  In the end, the bank get's back the 20,000 but goes in the hole because it had to pay you for taking out the loan.  It doesn't sound like a good deal for the bank.  Although someone has done some thinking about this, I'm sure.

Hmm, not really. The negative interest would be charged to your savings, not your loan on which you are already paying interest rates (negative for you). It means that you would most likely spend the money rather than leave it in your saving account where a negative interest is like a tax or a fee that you are paying to the bank. If people then spend more rather than leave the money in the bank, that will spur on economic activities. Demand goes up, firms start to hire or rehire, unemployment rate goes down, recession is averted or at least slowed down. Of course if you go down into the details, it's the Fed that would charge the negative interest to the bank on the money it has on reserve. The bank would then charge you, its customer, at a higher negative interest rate. Of course, you could beat the system by stashing your money under your mattress, but such inclination would see a rise in the crime rate as many would be tempted by the prospect of making a career as a home invader...;-)

[Baruch]

I'm not sure how this minus interest works, even though I had considered the idea long before any of this came up.  The reason I had thought about it was because I knew that lowering interest was one of the tools used to spur the economy, and I knew that they were already approaching zero, so I considered what would happen if interest rates were set below zero.  It sounded like a bizarre idea then, and it still does.

Let's say you borrowed 20,000 to buy a car, so every month you send the bank some kind of payment on the principal, and the bank sends you a check for the -1% it owes you.  In the end, the bank get's back the 20,000 but goes in the hole because it had to pay you for taking out the loan.  It doesn't sound like a good deal for the bank.  Although someone has done some thinking about this, I'm sure.

Two aspects.  Lower interest rates are stimulative ... in a bad way.  So going negative is stimulative in that same way ... per macroeconomic equations ... which are bogus.  Almost all economic theory is no better than Santa Claus.  Lower interest rates are part of the problem, not part of the solution.  Nothing in excess.  Zero or negative interest rates, like credit card interest rates in excess of 18% ... are part of the problem.

The other aspect ... not paying interest is theft by the bank/government.  You are entitled to some interest.  Negative interest is outright theft, with the bank acting as an accessory to the tax man.  Once we get to -100% interest per year ... just think how stimulative that will be?  People in Scandinavia, where they re mostly proposing this, are getting their money out of the banks and putting it into hard assets.  Even a hard asset, which carries no interest, is superior to simply giving all your money to the tax man.

Joe - I don't appreciate your raving lunacy in this subject ... but I think anyone can see where you are coming from.  Which US administration did you use to work for?  Nixon's?

[josephpalazzo]

Joe - I don't appreciate your raving lunacy in this subject ... but I think anyone can see where you are coming from.  Which US administration did you use to work for?  Nixon's?

SHUT THE FUCK UP ASSHOLE

[josephpalazzo]

BARUCH, if you want to clown around start your own thread. Just keep your fucking nonsense out of mine.